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Archive for May, 2007

So, finally, after all that animated discussion about social networking in India (see here and here) where two very eminent VCs took opposing positions on social networking in India, we finally see the first actual serious investment in this space here. Sequoia has just announced an investment in Minglebox, the supposed facebook of India. Honestly, I do believe that both parties have merits in their arguments. I think it is quite clear that running a purely ad supported internet business in India is not a sound proposition. According to some estimates, the total display advertising in India is pegged at under USD 50 million. In contrast to that, the US internet advertising industry is worth USD 17 billion. The difference is in orders of magnitude. Thats the reason most of the internet successes (apart from large media plays like Indiatimes or Rediff) in India till date have not been in the “fun” domain, but in the “utility” domain (job sites, matrimonials, travel etc), where some end consumer actually pays a fee for the service being offered rather than depend on advertising as a means of monetization.
Hence, in my opinion, the key would be for such sites to actually open up “new” revenue streams other than ads to make it work. Of course, thats more easier said than done. From what I know, not too many of these social nets even in the US have opened up many other revenue streams, and ironically, for some reason, the click through rates for Facebook have been the worst of the lot.
So, that leaves us with the question, what could the gameplan for a site like Minglebox be? They have raised USD 7 million, and even assuming a dilution of 50%, it implies a valuation of USD 14 million. That doesn’t seem cheap by any means. Will keep a keen eye on how that story develops from here on.